The IMF’s decision to downgrade the UK growth forecast, by 0.2% for 2016 and 0.9% for 2017, is an interesting decision if only for its timing. Nevertheless, with the City already taking action to move some jobs to mainland Europe/Eire, plus extensive reports of UK Research and University experts being “cut” from new applications for EU funding, it is clear a downward force is already happening.
There can be no doubt that next year will see more downward pressure on economic activity without the promised increase that a more open trading relationship with the remainder of the World might bring. The problem is the new activity will be many years away but the immediate impact of Brexit will only grow over the coming few years as it ’bites’ into more and more areas of our economy. It is therefore highly likely that the IMF’s 0.9% reduction for next year in contrast to this year’s 0.2% reduction is a move in the likely direction of travel.
One can only hope that the position will not worsen but we now face the “law of unintended consequences” and it is becoming apparent to all that in voting to leave we have taken a step into the dark in the hope there is something more pleasing around the corner. In the uncertain world we now occupy this appears at least economically to have been a brave decision; hopefully not a decision proven to have been “braver” than originally thought. Nevertheless, it is now clear to all that our task is to work even harder in order to try to make the IMF’s forecast look, when we have the benefit of hindsight, too harsh a judgment.
Commentary provided by Phil Oliver, Partner and economics spokesperson